04 March 2015

Sino Grandness released a poor FY14 result recently. Although the revenue grew by 25% to RMB2.9Billion, the net profit dropped by 19% to RMB233M as compared to previous year. The main reasons contributed to the drop of net profit were the increase of distribution & selling expenses (mainly advertising cost) and increase of finance costs well as changes in fair value of option derivatives in relation to convertible bonds.

The breakdown of the revenue by segments of Sino Grandness is oversea canned products RMB635M, domestic canned products RMB308M and beverages RMB1,877M. Gross profit margin improved due mainly to commencement of Hubei plant.

Balance sheet wise, total shareholder funds grew 34% to RMB1,572M, partly due to the RMB158M new placement to new investor. The number of outstanding shares increased to 673M from 587M previous year. NAV is about S$0.50, with EPS about 7.4 cents. ROAE is about 15% - 20%.

Company made an adjustment to the fair value of the convertible bonds liability for FY2013, from RMB349M to RMB524M. The current value of convertible bonds liability for FY2014 was RMB722M. This means that the company would need to get additional cash ready to settle the convertible bonds if IPO of Garden Fresh is not listed successfully before the maturity date of convertible bonds by June / July 2015. Worse comes to worst, the company may need to raise the fund from private placement which will further dilute the earning per shares and net asset value per shares.

I would not be surprised if Sino Grandness stay at the distress price level until the issue of IPO of Garden Fresh could be resolved. I would recommend risk adverse investors to stay away from this counter, as the probability of the delay of Garden Fresh IPO listing is getting higher now.

22 February 2015

According to latest result released by Ezion this month, it had achieved net profit of US$223M on the back of revenue of US$380M, which includes one time off net profit of US$30M plus from disposal gain of marine assets to Aus Group which is one of the associate companies. This is translated to EPS of about S$0.184 or trailing PE of about 6.5 times.

Based on research reports released by different stock broking firms, the result could be better if not the delay of some of the service rig projects. According to the forecast, the revenue could double up once 37 of the fleets could be fully utilized on or after year 2016. The core net profit is about US$177M, so if it could be doubled up in 3 years up, the net profit could be about US$354M or EPS US$0.22. I believe that the share price of Ezion could move up gradually once the current crude oil crisis can be ended latest by second half of the year or next year.

Some may think that Ezion would face a price cut in charter rate as the crude oil price dropped to US$60 from US$110 and above last year. However, we still do not have any concrete information from this yet, and we may find out more from next quarterly report, as some of the service rigs to be re-contract this year.

Some experts are expecting a drop of crude oil to US$20 before moving up later as OPEC countries are fighting against US oil producers as the oil storage hit record high recently. It is now about US$50/barrel for US oil and US$60/barrel for international oil.

Nonetheless, Ezion is investing mainly liftboat / service rigs business in Asia / Europe / Africa zone, where it is relatively new and full of opportunities as compared to Mexico / US zone. Hopefully with a better crude oil price next year, the PE valuation can be increased later as well.

05 February 2015

Singpost released latest quarterly report yesterday, with 9m15 revenue of S$670.9m and underlying net profit of S$116.1m reported. It is translated to 17.4% net profit margin.

For segment breakdown, conventional business - Mail & Digital services segment recorded a slight increase of 2.5% to S$377m with operating margin stood at 28.4% while logistic segment had a stellar performance with the increase of 13.5% in revenue to S$329m with 5.0% operating margin. Retail and eCommerce increased 5% in revenue to S$68m with 10% operating margin. Nonetheless, we saw that eCommerce segment registered a more than 40% growth in revenue compared corresponding last year to S$19.3m.

Moving forward, the group is focusing on productivity and managing costs in the mail business as well as to expand group's regional eCommerce logistics business and network. For property wise, the group is looking to develop retail space in Singapore Post Center as well as to construct a eCommerce logistic hub to support the growing eCommerce business in the region.

The group is proposing 1.25 cents dividend as per usual. The expected PE of the group is about 30 times based on current price of S$2.03.

Below is the summary of the financial report after the webcast reporting of GLP today:

The company will continue to bring values to investors via three pronged growth strategy - development of the industrial properties, fund management and operations of the logistic facilities

For development of industrial properties, the group is targeting of US$8bn total development completion in next 3 years and expecting US$1bn revaluation gains from this. The value creation margin is about 25%. Apart from it, the group receives development fees from development funds and promote income from reaching IRR hurdles in fund management platform

Fund management platform is expected to grow 99% compound annually from US$ 2.6 bn in year 2012 to US$ 20.4bn in year 2015, with additional US$ 8.1bn from US alone in FY2015. Fund fees expected to grow significantly over the years. GLP expected to complete fund syndication to pare down stake to 10% (from 55%) by 3Q15

For China market, GLP reduced its forecast for FY2015 development completion to US$1 bn from US1.1 bn due mainly to the delays in completion permitting process. Nonetheless, it's expecting a US$1.4 bn Total development completion in FY16

For Japan market, GLP continues its strategy of recycling capital from stabilized assets in Japan into development, as capitalization rate in Japan market is in the downtrend. The group is setting target of US$980 Mn for Development Completion in FY16

The group achieved Net Profit of US$381 Mn on the back of revenue of US$541 Mn. Changes in fair value of investment properties is US$358Mn. Annualized EPS and NAV are 9.84 US cents and US$1.82 each. Estimated ROE is about 5.5%. Current Market Cap of GLP is now S$11.85 Bn

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